what are vat exemptions

What Are VAT Exemptions?

What Are VAT Exemptions? Certain essential and critical sectors are exempt from paying VAT. For example healthcare, education, and charities, as well as everyday essentials like food and children’s products. In this discussion, we’ll delve into the world of VAT exemptions in the UK.

Exploring what they are. These goods and services are exempt, and how they impact businesses and individuals. After understanding VAT exemptions, we can gain insight into the UK’s tax system and how it supports the country’s economic and social well-being.


Get in touch with one of our experts to learn more about what are vat exemptions. We are available from 9:00 am – 05:30 pm Monday to Friday.


What Are VAT Exemption Schemes?

Value-added tax exemption is a scheme that allows certain businesses in the UK to be exempt from paying VAT. This is a tax charged on the value added to goods and services at each stage of the supply chain.

In the UK, businesses with an annual turnover below £85,000 can qualify for VAT exemption. This means that small businesses and start-ups may not need to register for VAT, which can simplify their tax obligations.

If a business is VAT-exempt, it means:

  1. No VAT Charged: The business does not charge VAT on its goods and services
  2. No VAT Refund: The business cannot claim back VAT on its expenses
  3. No VAT Registration: The business does not need to register for VAT

If a business supplies both VAT-exempt and taxable goods and services, it may be partially exempt from VAT. In this case, the business can claim back VAT on the taxable supplies but not on the exempt supplies. After Brexit, the UK has maintained the VAT exemption scheme. This ensures continuity for businesses. However, it is essential to stay informed about any future changes to the scheme.


What are the New Rules for VAT Exemption in the UK?

Recently, HM Revenue & Customs has introduced new rules and updates to the VAT exemption scheme, aiming to enhance clarity and simplify compliance. These changes impact various sectors, including education, healthcare, and charities.

  1. VAT Registration Threshold: Businesses with an annual turnover below £85,000 are exempt from VAT registration
  2. Partial Exemption: Businesses making both taxable and exempt supplies can reclaim VAT on taxable inputs, subject to specific rules
  3. Capital Goods Scheme: Adjustments to VAT recovery for capital assets, like property and expensive equipment, based on usage for taxable or exempt purposes
  4. Northern Ireland: Special rules apply for moving goods from Great Britain to Northern Ireland, allowing recovery of VAT incurred in the region
  5. Record Keeping: Businesses must maintain accurate records to support VAT exemption claims and demonstrate compliance


List of Goods and Services that are Exempt from VAT in  the UK

Here is a list of goods and services that are exempt from VAT in the UK:


Essential Services

  1. Healthcare services, including medical treatment, care, and related services provided by hospitals, hospices, nursing homes, and eligible healthcare providers
  2. Education services, including services provided by schools, colleges, universities, and vocational training institutions
  3. Financial services, including insurance, credit, and financial services, including banking and investments


Food and Beverages

  1. Certain food items, such as:
  2. Basic groceries (e.g., bread, milk, fruit, and vegetables)
  3. Meat, poultry, and fish
  4. Eggs and dairy products
  5. Beverages, including:
  6. Water
  7. Milk
  8. Fruit juice
  9. Tea and coffee


Children’s Products

  1. Children’s clothing and footwear
  2. Baby supplies, including:
  3. Diapers
  4. Baby food
  5. Baby equipment like strollers, car seats


Art and Culture

  1. Artworks, including:
  2. Paintings
  3. Sculptures
  4. Prints
  5. Antiques and collectibles
  6. Cultural events, including:
  7. Theater performances
  8. Concerts
  9. Museums and art gallery admissions


Land and Property

  1. Sales, leases, and rentals of commercial land and buildings
  2. Residential property sales and rentals (exempt from VAT, but may be subject to Stamp Duty Land Tax)


Other Exempt Goods and Services

  1. Burial and cremation services
  2. Charity fundraising events and donations
  3. Certain medical equipment and appliances
  4. Prescription medications and pharmacy services

Services provided by not-for-profit organisations, including:

  1. Sports clubs
  2. Community groups
  3. Charitable organisations

Note that this list is not exhaustive, and specific rules and regulations may apply to each category. It’s always best to consult HMRC guidance or a qualified VAT specialist for accurate and up-to-date information.


The Bottom Line

In conclusion, VAT exemptions in the UK play an important role in supporting various industries and individuals. This is by exempting them from paying VAT. The exemptions cover a wide range of goods and services. This includes essential services like healthcare and education, as well as food and beverages.


Reach out to our expert professionals to get your queries answered instantly. We would love to come up with the best possible solutions to your queries.


Disclaimer: All the information provided in this article on what are vat exemptions, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.

Feeling Lost with Finances?
We're Here to Help!

Tax filings
0 +
Accounts filings
0 +

Request A Callback

Call Now